Back to top

Image: Bigstock

SWKH vs. RCM: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors with an interest in Financial - Miscellaneous Services stocks have likely encountered both SWK Holdings Corp. (SWKH - Free Report) and R1 RCM Inc. (RCM - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, SWK Holdings Corp. is sporting a Zacks Rank of #2 (Buy), while R1 RCM Inc. has a Zacks Rank of #5 (Strong Sell). Investors should feel comfortable knowing that SWKH likely has seen a stronger improvement to its earnings outlook than RCM has recently. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

SWKH currently has a forward P/E ratio of 8.67, while RCM has a forward P/E of 37.11. We also note that SWKH has a PEG ratio of 0.87. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. RCM currently has a PEG ratio of 3.37.

Another notable valuation metric for SWKH is its P/B ratio of 0.75. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, RCM has a P/B of 45.02.

Based on these metrics and many more, SWKH holds a Value grade of B, while RCM has a Value grade of D.

SWKH sticks out from RCM in both our Zacks Rank and Style Scores models, so value investors will likely feel that SWKH is the better option right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


R1 RCM Inc. (RCM) - free report >>

SWK Holdings Corp. (SWKH) - free report >>

Published in